Chapter 16: Problem 14 Van Buren Resources, Inc. is considering borrowing $100,0

Chapter 16: Problem 14
Van Buren Resources, Inc. is considering borrowing $100,000 for 182 days from its bank. Van Buren will pay $6,000 of interest at maturity, and it will repay the $100,000 of principal at maturity.
a. Calculate the loan’s annual financing cost.
b. Calculate the loan’s annual percentage rate.
c. What is the reason for the difference in your answers to parts a and b?
Chapter 17: Self-Test Problem 1
The White Oak Company’s annual sales are $219 million. An average of 9 days elapses between when a customer mails its payment and when the funds become usable by the firm.
a. If the company could speed up the collection of funds by 2 days, what would be the increase in the firm’s average cash balance?
b. Assuming that these additional funds can be invested in marketable securities that yield 7 percent per year, determine the increase in White Oak’s annual (pre-tax) earnings.